SAFEMA Tribunal on Demonetisation, Benami Entries and Gold Trade: Analysis of Shree Nakoda Gold Vs Initiating Officer

1. Background and Context

The Appellate Tribunal under SAFEMA at New Delhi, in Shree Nakoda Gold Vs Initiating Officer, confirmed the provisional attachment of funds under the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act). The case arose out of deposits of demonetised high-denomination notes soon after 08.11.2016, and subsequent routing of those funds through banking channels as alleged accommodation entries masked as bullion trade.

The appeal related to:

  • Provisional attachment under Section 24(3) of PBPT Act
  • Confirmation of attachment under Section 26(3) of PBPT Act
  • Amount involved: ₹39,50,000/- standing in the bank accounts of M/s Shree Nakoda Gold at Axis Bank, Fort Branch, Mumbai and Bank of Maharashtra, Parel Branch, Mumbai

The central allegation was that this amount represented consideration in a benami arrangement: demonetised cash allegedly belonging to the assessee was deposited in accounts of entities managed by one Shri Asit B. Doshi (treated as benamidar), and thereafter wired back via RTGS to the assessee, who claimed it to be genuine sale proceeds of gold and silver bars.

2. Facts in Brief

2.1 Parties and Roles

  • Assessee / Alleged Beneficial Owner:

    • M/s Shree Nakoda Gold, a proprietorship of Kamlesh Kantilal Jain HUF
    • Engaged in trading of gold and silver bars (999/995 purity, standard denominations)
    • Turnover (approximate):
      • FY 2014-15: ₹178 crore
      • FY 2015-16: ₹20.34 crore
      • FY 2016-17: ₹14.89 crore
    • Registered under Maharashtra VAT

  • Alleged Benamidar:

    • Shri Asit B. Doshi
    • Controlled/managed certain entities, including M/s Jai Ambe Enterprises and M/s Aman Enterprises

  • Intermediary (as per Revenue):

    • One Shri Mangilal, stated to have provided demonetised cash to Asit B. Doshi

2.2 Transaction Pattern

According to the Revenue:

  1. Post 08.11.2016, demonetised notes amounting to ₹39,50,000/- were deposited in bank accounts of entities controlled by Shri Asit B. Doshi.
  2. As per statement recorded under Section 131 of the Income Tax Act, 1961, Shri Asit B. Doshi admitted:
    • He received ₹39,50,000/- in cash from Shri Mangilal
    • He retained around ₹1,85,000/- as commission at about 5%
    • He arranged RTGS transfers totalling about ₹37,50,000/- to M/s Shree Nakoda Gold:
      • ₹17,88,989/- from M/s Aman Enterprises
      • ₹18,94,823/- and ₹53,191/- from M/s Jai Ambe Enterprises
  3. The RTGS credits into the assessee’s bank account are not disputed.

The assessee, on the other hand, maintained that:

  • The RTGS credits represented legitimate sale proceeds of gold and silver bullion
  • Invoices, stock records, VAT returns, ledger accounts, and bank statements all reflected genuine transactions
  • The gold and silver were supplied under sales invoices dated 17.11.2016, with delivery taken by an individual known to the assessee’s family

3. Assessee’s Submissions Before the Tribunal

3.1 Nature of Business and Transaction Explanation

Counsel for the assessee argued that:

  • The assessee had been regularly engaged in bullion trading for several years and had a substantial turnover, which made a single transaction of ₹39,50,000/- insignificant relative to business scale.
  • The assessee typically traded in gold bars of purity 999 or 995 in denominations such as 1 gms, 5 gms, 10 gms, 20 gms, 50 gms, 100 gms etc., and similar products in silver.
  • For the impugned period:
    • The assessee purchased 1200 grams of gold from its supplier (DIYA) and paid about ₹36,85,704/- via Axis Bank on 14.11.2016.
    • Subsequent RTGS receipts from M/s Jai Ambe Enterprises and M/s Aman Enterprises were claimed as consideration for sale of:
      • 615.400 gms gold bars (Invoice No. 493 dated 17.11.2016)
      • 584.600 gms gold bars (Invoice No. 494 dated 17.11.2016)
      • 1200 gms silver bars (Invoice No. 495 dated 17.11.2016)
    • Physical delivery of bullion was allegedly taken by one Shri Jayantilal (a relative of the assessee’s Karta), who came along with his brother Shri Champalal and signed on the assessee’s invoices as acknowledgment.

The assessee emphasised: